Budgeting Direct Costs of Sponsored Programs

Budgeting Direct Costs of Sponsored Programs

Procedure Area: Vice President for Research

Latest Revision: June 30, 2023

Responsible or Contact Office: Office of Sponsored Programs

 

Roles & Responsibilities

1. Principal Investigator (PI): Generally, a Principal Investigator is the primary individual responsible for the conduct and administration of a sponsored program received at UVA. A sponsored award with multiple PIs, will have a single person identified as the primary PI, while the others will be Co-PIs or Co-Is (also known as Lead PIs). An award PI in the financial system is generally the primary PI. For multi-disciplinary programs, Co-PIs are the Lead PIs assigned to the internal sub-awards (Grants) associated with the sponsored award (Award) . A Principal Investigator has the overall responsibility to ensure that charges on the Grant are aligned with work performed.

2. School/Department administrator is responsible for preparation of the proposal budgets and subsequent pre-award modifications including, but not limited to, re-budgeting, adding new subrecipient, no cost extension, change in scope of work, change in Principal Investigator and other actions, to the Office of Sponsored Programs, using the University’s research administration system, ResearchUVA Powered by Huron (ResearchUVA PBH).

3. The Office of Sponsored Programs or Schools with delegated authority to submit proposals are responsible for reviewing the proposal budget for completeness, submitting the proposals to sponsors. The Office of Sponsored Programs is also responsible for reviewing and processing subsequent budget change requests, after obtaining sponsor approval when required. The offices ensure all proposals and changes in awarded budgets are following the sponsor and Institutional policies.  

Purpose

Per the guidelines in Office of Management and Budget Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (2CFR 200, Uniform Guidance), UVA is required to provide reasonable assurance that federal awards are managed in compliance with federal statutes, regulations and the terms and conditions of the federal award. 

The procedure for developing budgets for direct costs must include a spending plan aligned with the objectives of the research work outlined in the proposal narrative.  

Definitions

Cost Principles of the sponsor govern how sponsored award funds can be expended. These requirements vary by sponsor and type of activity being funded.  The federal guidelines on cost principles appropriate for budgeting and expending federal funds are based on:

Reasonableness - A cost may be considered reasonable if the nature of the expenditure and the amount involved reflects the action that a prudent person would take under the circumstances.

Allocability - A cost is allocable if it is beneficial to the project.

Allowability - Costs must be allowed in accordance with the Uniform Guidance and terms of the sponsored agreement.

Consistency - Costs incurred for the same purpose in like circumstances must be treated consistently as either direct or facilities and administrative (F&A) costs, and the method used to estimate, record, and report costs must be consistent as well.  See the table below for a description of how costs should be treated.

Total Cost (TC) of a sponsored project is the sum of allowable direct and allocable indirect costs (Facilities and Administrative Costs).

Direct Costs are those costs that can be identified specifically with a particular sponsored project, an instructional activity, or other institutional activities, and can be directly assigned to such activities relatively easily with a high degree of accuracy.

Total Direct Costs (TDC) consist of all charges directly associated with research.

Modified Total Direct Costs (MTDC) consist of salaries and wages, fringe benefits, materials and supplies, services, travel, and subawards up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care, tuition remission, rental of off-site facilities, participant support costs, scholarships, and fellowships as well as the portion of each subaward in excess of $25,000 shall be excluded from modified total direct costs.

Facilities and Administrative Costs are indirect or overhead costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project. F&A costs are assessed at federally negotiated rates and MTDC base, unless a sponsoring agency uses a different overhead rate. The federally negotiated rates for F&A and fringe benefits can be found here.  

Procedures

Budgeting and Charging of Direct Costs

It is important to demonstrate that the budget proposed is reasonable, allowable, and consistent.  A budget justification should be submitted to allow each budget item to be explained relative to the proposed research.  The specifics of the sponsoring agency’s budgetary guidelines should be followed carefully.  Budgets should be prepared for the entire proposed project. Both direct and F & A costs should be identified in the budget. The following categories are generally included in the preparation of a proposal budget.

Personnel, salaries and wages
The salaries and wages of University employees directly associated with the sponsored program project are considered direct costs. These costs should be charged to the project in proportion to the percent of each employee's effort expended on the program during each pay period except for that portion which may be applied to cost sharing. Typically, these are budgeted with an inflation rate of 3% per year.

Salary Cap - The DHHS (“NIH”) salary cap should be applied to all awards originating from any DHHS agency (NIH, HRSA, AHRQ, SAMHSA, CMS, among others).

Graduate Research Assistants - Graduate Research Assistant wages directly associated with the sponsored program project are considered direct costs and should be charged to the project in proportion to the effort expended on the program during each pay period except in the rare case when a graduate assistant’s cost is being used for cost sharing. 

Student wages - Budgets should reflect estimated hours of work on the project at an hourly rate.

Other professionals -Examples of personnel in this category are research associates, technicians, and programmers whose salaries are budgeted based on estimated effort required for the project.

Postdoctoral fellows- The personnel typically follow NIH NRSA stipend levels, which can be found on the NIH website.

Administrative/Clerical Staff - Per the guidelines in Office of Management and Budget Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (2CFR 200, Uniform Guidance), salaries of administrative/clerical staff should normally be treated as F&A costs; however, such salaries may be included in the budget with justifications explaining how such services are integral to a project or activity, and individuals involved can be specifically identified with the project or activity.

Fringe Benefits - The employer's cost of fringe benefits is considered a direct cost and is charged to sponsored programs based on federally approved rates. These composite rates include the cost of the University and State retirement programs, health insurance, group life insurance, social security, disability insurance, workmen's compensation, and unemployment compensation. The current negotiated rates to be applied to budgeted salaries and wages can be found here.

NOTE: Graduate Research Assistant health insurance costs are budgeted under Other Direct Costs and are subject to F&A charges.

Tuition - The In-State portion of tuition (remission) for enrolled graduate students, along with any associated required fees, should be budgeted and charged as a direct cost in proportion to the percent of each graduate student’s effort expended on the program during the semester.


Equipment – Equipment is defined as a tangible personal property with an expected service life of one year or more, and a unit acquisition cost of $5,000 or more. Materials and supplies used to fabricate equipment which is subsequently capitalized and where ownership is retained by UVa also falls under this category.
NOTE: Equipment costs are exempt from F&A recovery unless the indirect cost basis for the award is total direct cost (TDC).

Travel –Travel should be treated as a direct cost of the grant or contract where such travel will provide direct benefit to the program and is within specific sponsor restrictions. Reimbursement of travel costs are subject to the Commonwealth of Virginia and University of Virginia standard policies and procedures. Sponsors request that domestic and foreign travel are detailed in the proposal.

    • Domestic travel is travel within the United States and Canada. Examples of domestic travel expenditures are as follows:

    • Foreign travel is deemed to be travel outside the United States and Canada including travel within the U. S. or Canada when en route to or returning from a foreign destination.
      Travel – Subsistence and Lodging, For
      Travel – Public Carrier, For
      Please refer to the       Procurement and Supplier Diversity website for further information about domestic and foreign travel.
    • Travel, Personal Vehicle
    • Travel, State Vehicles
    • Travel, Rental Vehicle, U.S.
    • Travel, Public Carrier, U.S.
    • Travel, Subsist and Lodging, U.S. 

Trainee Support Costs

    • Trainee Stipends are allowable as direct costs on fellowships and training grants only. This cost category is restricted and any increase or decrease in the total amount budgeted requires prior sponsor approval. The most frequently encountered stipends are as follows:
      • Undergraduate Stipends
      • Graduate Stipends
      • Post Doctoral Trainee Stipends
    • Trainee Tuition- In-State and Out-of-State tuition and fees charged to regularly enrolled students should be budgeted and charged as a direct cost of training grants. Charges to this cost category are frequently subject to specific program restrictions and reference should be made to the sponsoring agency policy guidelines to determine allowability of charges. The expenditure types for trainee tuition and fees are as follows:
      • Undergraduate Tuition and Fees
      • Graduate Tuition and Fees
    • Trainee Travel
      Travel costs within the terms of the sponsor award for full-time trainees who have received formal appointments are considered direct costs of the grant. The travel must be in accordance with University and sponsor regulations.

Materials and Supplies - General purpose materials and supplies are indirect costs and should not be directly charged to federal awards. Examples include copy paper, office supplies, and general use cleaning materials. However, the cost of supplies, materials, acquisition of animals, wet lab supplies, non-capitalized equipment, etc. directly required for the performance of the grant or contract may be considered direct costs and must be included in the proposal budget when a detailed, categorized budget is submitted to the sponsoring agency. These budgets must include appropriate justifications and, when needed, the allocation methodology applied for identifying proportionate direct benefits to the proposed research and other projects. When a sponsoring agency does not require a detailed budget (e.g., NIH modular grants) the internal budget developed must include such justification and allocation methodology. If the use of the items is shared among projects or labs, the allocation methodology must be created, documented (please see UVA Cost Allocation Form), and periodically reviewed by the research administration offices of the award managing schools, departments, and/or research centers.

Consultant Services – These services are advice or assistance of a purely advisory nature provided for a predetermined fee by an outside individual entity. Individuals providing consulting services must always meet the criteria defining an Independent Contractor. 


Other Services - Direct costs in this expenditure category include but are not limited to the following: The services listed above may be provided by internal service providers or external vendors. Charges for services offered by internal services providers should be based on rate schedules issued by each support service activity as approved by the University.

    • Telecommunications (Long Distance Service) (please note UG section §200.216: “Prohibition on certain telecommunications and video surveillance services or equipment” applies for federal or federal flow through awards)
    • Printing (other than Stationery)
    • Photocopying, Microfilming, Developing and other Reproduction
    • Publication Costs - Sponsored Programs
    • Freight and Express Service
    • Technical Services
    • Animal Care

Subawards - An external or outgoing subaward is issued by the University that formalizes a collaborative research relationship with a third party to perform substantive sponsored project services under a Sponsored Award made to the University. Such costs are allowable as direct costs to sponsored program projects. All subawards must be made in accordance with University and sponsor regulations. Under MTDC base, only the first $25,000 for each subaward is subject to F&A.

Rental of Off-Site Facilities - Off-site facilities are considered to be non-UVa owned property utilized for a sponsored project. Such charges are exempt from F&A recovery. Expenditure types in this category include:

    • Rent, Buildings and Facilities
    • Rent, Land

Alterations and Renovations – Prior sponsor approval is required for this expenditure. Generally, alterations and renovations are direct costs only where they are essential to adapt existing space or utilities to accomplish the objectives of the sponsored program. The space provided must actually be occupied by the project personnel.

Patient Care Costs - Prior approval is required before incurring research patient care costs. Once approved, such costs are generally limited to the amount originally provided in the sponsored award budget and sponsor permission is typically required to increase or decrease this budget line item. Research patient care costs are exempt from F&A recovery unless the indirect costs basis for the award is total direct cost (TDC). Research Patient Care Costs include the costs of routine and ancillary services provided by hospitals to individuals participating in research programs. The costs of these services normally are assigned to specific research projects through the development and application of research patient care rates or amounts. The University of Virginia Medical Center has established a rate agreement with the federal government that governs these charges. Standard of care charges are costs associated with procedures that are not for the research study,  generally not allowed expenditures under sponsored awards since  they are paid by the patient or the patient’s third party insurer. Research patient care costs do not include otherwise allowable items of personal expense reimbursement, such as patient travel or subsistence, consulting physician fees, or any other direct payments related to all classes of individuals, including inpatients, outpatients, subjects, volunteers and donors costs of ancillary tests performed in facilities outside the hospital on a fee-for-service basis (e.g., in an independent, privately owned laboratory) or in an affiliated medical school/university based on an organizational fee schedule data management or statistical analysis of clinical research results.

Participant Support Costs - These are costs paid to (or on behalf of) participants in meetings, conferences, symposia, and workshops, when there is a category for participant support costs in the award budget. Registration fees, travel allowances, manuals and supplies, and tuition and stipends may be regarded as participant support costs in this case.

Participant Support Costs should be budgeted as follows:

Participant Support – Stipends

Participant Support – Subsistence

Participant Support – Travel

Participant Support - Other

NOTE: Participant support costs may not be rebudgeted into other cost categories without prior approval from the sponsor. NOTE: Participant support costs are exempt from F&A recovery unless the indirect cost basis for the award is total direct cost (TDC).

Other Direct Costs - Other costs not included in direct cost categories indicated above.

Cost Sharing or Matching - Sponsors often require itemized budgets for cost sharing or matching proposed on grants and contracts. These costs are portion of the project costs that are not paid for by the sponsor but must follow federal or sponsor budgeting guidelines. Waived indirect costs when used for cost sharing, must be included in the proposal budget and justifications. 

Policy or Other Underlying Requirement UVA Policies:

Policy FIN-017: Consistent Treatment of Sponsored Programs Costs

Previous version

Procedure: 8-14Effective: July 1, 2001